David Cameron said today that the government is determined to ensure that employment law will no longer be seen as a "barrier to growth" as ministers unveiled plans to bar workers from being able to take out unfair dismissal claims against their employer for the first two years.

The decision to water down workers' rights by raising the qualifying period from one year to two is part of a wider set of reforms proposed to improve what ministers say is a "costly and time-consuming" employment tribunal system.

The number of tribunal claims rose to 236,000 last year – a record figure and a rise of 56% on 2009, and business has to spend almost £4,000 on average to defend itself against a claim, according to the government.

Ministers will also consult on introducing fees for bringing a tribunal claim, saying there were concerns that the current system leads to a large number of unmerited or vexatious claims.

The prime minister said the measures were designed to give businesses more confidence to take on workers and support growth, amid concerns raised by businesses that the system has become too costly and time-consuming, and places unnecessary strains on small firms.

Unveiling the proposals just a day after being barracked by Labour over the latest growth figures that showed the economy has shrunk by 0.5%, Cameron said cutting red tape and maintaining a "flexible and dynamic" market was a critical element of the government's growth strategy.

"Today's announcements on reforms to employment law are among the first conclusions of our government-wide growth review, and highlight our determination to ensure that employment law is no longer seen as a barrier to growth, while making sure that employees and employers are treated fairly," he said.

"Giving businesses the confidence to take on somebody new will be a real boost to the economy, and help generate the sustainable growth we need."

The decision to double the qualifying period for claims is designed to reduce the number of disputes that go to tribunals. Other proposals include first-stage compulsory mediation stage for workplace disputes via the Advisory, Conciliation and Arbitration Service (Acas).

The government also wants to see the tribunal process speeded up via a number of measures, such as widening the scope for cases where judges can sit alone.

The plans were published alongside an "employers' charter" to raise awareness and give clarity among employers on what they "can and can't do" when managing their staff and covers a wide range of employment law issues.

Today's plans were welcomed by business leaders, but panned by the TUC leader, Brendan Barber, who said that instead of making it harder for badly treated workers to seek justice, the government should focus its sights on poor employment practices.

Earlier today, the business secretary, Vince Cable, said the current system served as a "major impediment" to small businesses hiring people.

He told BBC News: "The process of going through tribunals ... [is] a very costly and time-consuming process and all the feedback we get from employers' groups, particularly small business groups who are absolutely key to hiring people and getting us out of the economic mess we're in, is that the fear of a tribunal is a major impediment to them hiring people."

He added: "If you're a big multinational company with an HR department this is not an issue. But for a very small company, something which ties you up in litigation for a long period, costs £4,000 a case, this is a big deterrent."

Unions insisted that delivering justice to the thousands of people who every year are wronged at work should be "at the heart" of any change to the tribunal system.

Barber said: "While employer groups complain that tribunals are costing them too much, they have lost sight of the fact that if firms treated their staff fairly, few would ever find themselves taken to court.

"Instead of making it harder for employees who've been treated badly at work to seek justice, ministers' time would be better spent looking at why so many companies, especially small employers, have such poor employment practices.

"Rather than being taken in by the employer lobby, the government should stand firm and allow employment tribunals to continue holding rogue employers to account, and delivering justice for all workers who have been discriminated against or treated unfairly."

John Cridland, the CBI's director general designate, said it was "in everyone's interest" that disputes are resolved swiftly and fairly. "Introducing an element of charging would help weed out weak and vexatious claims, clearing the way for more deserving cases to be heard," he said.

"Extending the qualifying period for unfair dismissal is a positive move that will give employers, especially smaller ones, the flexibility and confidence they need to hire."

David Frost, director general of the British Chambers of Commerce (BCC), said: "Employment tribunals are one of the top business issues and we strongly welcome the government's move to reform the system.

"The current system wastes business time and money, and distracts employers from growing their businesses and creating much-needed jobs. In particular, the introduction of a fee for claimants will help to discourage spurious and baseless claims."

The BCC also welcomed a proposal to require all claims to be lodged with Acas to allow conciliation before they reached a tribunal.

"This is a very positive step but must be accompanied with enough resource for Acas to deal with new claims," said Frost.

Bob Crow, general secretary of the Rail Maritime and Transport union, said: "With hundreds of thousands of people facing the loss of their jobs in the austerity cuts this year, it is now crystal clear that the government intends to give bosses the right to hire and fire at will.

"You will have to wait two years for protection under the law with these plans and that's a green light for workers to be dumped out on the cobbles just before they get their 24 months service under their belts."